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This excerpt taken from the MMM DEF 14A filed Mar 28, 2005. Nonqualified
Stock Options — A Participant who exercises a nonqualified stock
option recognizes taxable ordinary income in the year the option is exercised
in an amount equal to the excess of the fair market value of the shares
purchased on the exercise date over the purchase price. The Company is entitled
to a tax deduction in an amount equal to the ordinary income recognized by the
participant. The excess of the proceeds from any subsequent sale of the shares
purchased over the fair market value on the date of exercise is taxed as
long-term capital gain if the shares are held more than one year and as
short-term capital gain if held one year or less.
(c) |
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